China's High Tech Industry and the World Economy: Zhongguancun Park

Volume 6 | Issue 2 | Article ID 2661 | Feb 01, 2008 The Asia-Pacific Journal | Japan Focus

Yu Zhou

China’s High Tech Industry and the World dynamic indigenous companies were born. The Economy: Zhongguancun Park [1] article concludes that the growth and competitiveness of China’s own technological Yu Zhou companies may eventually create more lasting impact on the future global landscape than Can Chinese companies innovate in cutting- China’s vaunted labor force. edge technology? It is a question many have been asking in the last few years as the size What is Zhongguancun? and dynamism of China’s economy become apparent. This article focuses on theNestled in the northwest part of Beijing and development of Chinese companies in the home to many of China’s most prestigious information and telecommunication sectors of universities and research institutes, ZGC is industry, conventionally known as “Information known as China’s “Silicon Valley.” Communication Technology” (ICT) [2], among the most dynamic, profitable and globalized industries.

It is often argued that China’s rapid economic growth and national competitiveness are driven by its booming export industry, powered primarily by foreign affiliated companies. In this way, China appears to closely follow the footstep of Japan, and other smaller Asian dragons, starting from labor-intensive industry and gradually moving up the value chain. This story is not wrong, but it is incomplete — two other factors are also at play in China: rapidly emerging competitive domestic firms, and a vast and dynamic domestic market. While the western business world is agog with enthusiasm about a Chinese market that it hopes to dominate, this study examines how this market, in conjunction with China’s export industry, are creating powerful synergetic forces for indigenous companies. I approach the rise of Chinese companies historically by retracing the footsteps of China’s most prominent science park — Zhongguancun (ZGC hereafter) in Beijing — where many of the most

1 6 | 2 | 0 APJ | JF

Map of Zhongguancun Science Park in 2006 thoroughfare selling computer hardware and software. Most were spin-offs from universities and Since the mid-1980's, ZGC has transformed the nearby Academy of Sciences. Haidian district from a quiet suburb designated for scientific archive. research and higher education into a bustling hub of high-tech business and research and development (R & D) labs (Francis 1997). The following snapshots show the region’s startling transformation in a matter of years.

ZGC in the late 1990s. Scattered office towers went up along the thoroughfare, and large indoor computer wholesale markets occupied the ground floors.

ZGC in the early 1980s. The peaceful are with wall- encircled universities or research institutes. Each institute formed a residential compound with few transactions outside. Haidian District archive.

By 2005, the area hosted over 17,000 certified new technology enterprises; nearly 60 percent were in information communication technology (ICT) or related sectors [3].

ZGC in the new millennium. The core of ZGC has become a corporate business center of high-tech Chinese and multinational corporations.

Figure 1. shows four major indicators of ZGC growth from 1988-2004 in numbers of firms, employees, gross revenue and government tax income. Although the patterns are somewhat

ZGC in the mid-1980s. ZGC became known as the different, all show significant growth, “Electronics Street”, with stores along the main especially since the late 1990s.

2 6 | 2 | 0 APJ | JF

Figure 1: Growth of Zhongguancun Science Park (1988-2004). Source: Annual report of Zhongguncun Science Park, multiple years. (ä¸å…³æ‘ç§‘æŠ€å›- åŒºç»æµŽå‘å±•ç»¼è¿°, å„å¹´.)

ZGC is a different kind of technological region from the more familiar booming export- oriented hubs in China, exemplified by Figure 2: The number of ICT companies in the five Shenzhen and Shanghai on the south and most concentrated regions in China. Source: China central coasts. Shenzhen and the surrounding Economic Census, 2004. The total numbers are the area, Dongguan, developed since the 1980s as sum of companies in computer equipment China’s first special economic zone, hosting manufacturing, telecommunication equipment manufacturing, electronic parts manufacturing, China’s earliest and one of the largest clusters telecommunications, internet services, and computer of information communication and technology services and software. Source: National Bureau of (ICT) companies. Some of China’s most Statistics of China based on the 2004 Economic successful high-tech firms are located there Census. such as Huawei; though the vast majority specializes in labor-intensive assembly for Compared to regions in other developing export. Shanghai and its environs such as city countries, ZGC also has unique features. Its of Suzhou emerged in the 1990's as a new enterprises did not grow out of a historically center of high-tech production. It attracts more rooted business structure such as those in capital-intensive and higher-end manufacturing India, South Korea and Japan, where large, establishments, such as those making notebook privately funded business powerhouses have computers and semi-conductors, thanlong been in existence. All Chinese Shenzhen. Multinational companies from the technological commercial firms had to be United States, Europe, Japan and Taiwan play created — from scratch — in the post-reform dominant roles in both Shenzhen and Shanghai. era that began in the 1980's. Further, ZGC The majority of foreign investments there have does not feature multinational corporations targeted export markets, although in recent (MNCs) as the dominant players, unlike in years investors have paid growing attention to large Latin American countries such as Brazil China’s rapidly growing domestic market (which also has a large domestic market), (Figure 2). though MNCs have been welcomed as an

3 6 | 2 | 0 APJ | JF integral part of the mix. And technological was designed as an incubator to create globally progress in ZGC has been driven primarily by competitive technological leadership. domestic demand rather than export needs. Over 85 percent of ZGC’s revenue has come Thus far, ZGC has been relatively successful, from domestic sales of products and services though it is still far from reaching its ultimate (Zhongguancun Administrative Committee goal. As one of China’s 53 national-level high- 2005 p. 10). Many of China’s well-known ICT tech zones, ZGC generates about one-seventh companies are found in ZGC: Lenovo, the world of their total revenue (ZGC government third largest person computer manufacturer; website). About a quarter of the companies in Baidu, China’s leading Internet search engine the region derived more than half of their company; UFIDA, China’s largest privately revenue from technology sales[4]. Of 25 owned software company; Founder, China’s Chinese technology companies listed on largest digital media company; Datang, one of NASDAQ by 2005, 13 were located in ZGC. By China’s largest telecommunication solution 2007, about 100 companies in ZGC have been companies; Aigo, China’s leading portable publicly listed in stock markets in China and storage and digital entertainment product abroad, easily a record among all China’s 52 maker, and Sina.com and Sohu.com, two of national high-tech zones. China’s most popular Internet portals. In other words, the advance of firms in ZGC is driven ZGC and Theories of Technological not by China’s most prominent advantage in Development the international division of labor — i.e., inexpensive labor — but by the ability to wed If viewed through the most influential theories advanced technologies with the Chineseof East Asian technological progress, ZGC market. would appear to be an outlier. From Schumpeter onward, most theorists have held Despite its prominence in China andthat technological changes constitute the pronounced global ambitions, ZGC remains an driving force in the advancement of societies international enigma. Its origin in the centrally (M. Castells 1996; Malecki 1991; R. R. Nelson planned economy and its location in China’s 1996). Yet how those changes occur under capital invite skepticism over whether it will be systems other than mature capitalism remains able to compete with vibrant innovative centers contentious. In the last three decades, the in mature capitalist economies such asexperiences of East Asia, particularly Japan, California’s Silicon Valley (Cao 2004). In South Korea and Taiwan, have inspired two essence, ZGC is an audacious experiment by a developmental theories. late industrialized country. China is not content with being simply a labor-intensiveThe first holds that technological progress in manufacturing workshop for foreign MNCs. newly industrialized countries is most likely to Nor is it satisfied with technology acquisition be achieved through a learning process and upgrading through a gradual process, consisting of borrowing, adapting, and through the export commodity chain, as some improving upon foreign designs rather than Southeast Asian countries have done. While through frontier innovation involving that process is running its course in coastal formalized R & D (Amsden 1989; Cumings China, China hopes that its enormous and fast- 1987; M. Hobday 1995; M. Hobday 2001; Kim growing domestic market will also propel its 1980). Export industries are thus the best best-endowed regions directly into thecatalyst and vehicle for technological learning, innovative technology market, while being open the theory argues, as external markets provide to MNC investment and competition. ZGC thus competitive incentives and require fiscal

4 6 | 2 | 0 APJ | JF discipline of the producers. technological sectors within a transitional economy. The second theory maintains that the active engagement of states is indispensable in initiating and promoting industrial development and technological upgrades in developing countries. Skilled state interventions through timely subsidies, targeted industrial policies, capital investment, tax and regulatory incentives, and strict financial standards can speed up technology acquisition, this theory asserts (Amsden 1989; B. P. Evans 1995; Haggard 1990; Wade 1992).

The first theory tends to place least emphasis on the role of domestic markets in the technological trajectory of local enterprises in developing countries, as the previous regime of The quadrangle system of innovation in import-substitution was discredited as Zhongguancun, Beijing. ineffective. If the domestic markets of the four Asian “dragons” are too small to merit much Beyond the International Division of Labor attention, the same cannot be said of the market of mainland China, one of the largest in Since the 1980s, an enormous stream of the world (OECD 2006). The impact of such a literature has been produced based on a close market on domestic enterprises should not be examination of the development experiences of underestimated. Latin America and East Asia. Consequently, a seismic shift has occurred in developmental China is also often said to support the theory theories. They now consider participation in the that state intervention is essential forinternational division of labor as a prerequisite promoting technological development. But for development, while largely ignoring the while the state has indeed played anroles of domestic markets and marginalizing indispensable role in developing ZGC’sthe contribution of indigenous firms in such a technological programs and policies, it is only a market. Modernization theories in the 1960s part — and not necessarily the dominant part — and 1970s, in contrast, whatever their of the regional quadrangular innovation system shortcomings, at least put more emphasis on that has been taking shape since the 1980s in domestic market development (Rostow 1971). ZGC. That system consists of the state, MNCs, research institutions and local firms. Each For developing countries, participating in the should be understood as a reflexive actor in a international division of labor means prizing transitional political economy facing theexport activities, starting from the bottom of growing influence of globalization. The story of the technological hierarchy with the hope of ZGC thus challenges the most influential gradually moving up. Export industry is viewed wisdom on East Asian technologicalas generating a path for technological development by revealing how indigenous acquisition. Stephan Haggard, for example, markets shape technological changes in a holds that the “crucial difference” between the rapidly globalizing industry, and howEast Asian and Latin American newly institutional transformation takes place in industrialized countries (NICs) is “the

5 6 | 2 | 0 APJ | JF difference between industrialization through with highly competitive industry in China export and import substitution” (Haggard 1990 dominated by imported technology and foreign p.27). In a detailed comparative study of the affiliates. These firms are segregated from “four dragons” — Taiwan, Hong Kong,other domestic sectors and thus have a limited Singapore and South Korea — Hobday (1995) impact on local production and the diffusion of presents a general model of technological technology in China (Huchet 1997; Lemoine, learning through interaction with foreign firms. Francoise and Deniz Unal-Kesenci 2004). He emphasizes the importance of export, and in particular the Original EquipmentEven in the most successful export-oriented Manufacturer (OEM) system [5] as a learning economies--upon closer examination—scholars platform — “an enduring technological training have found that import-substitution has played school for later comers” (p. 192). critical roles during the take-off phases of several East Asian countries (Chang 2002, In contrast to the successes of East Asian Webber and Ridgy 1996). Economic historian, export-oriented economies, the import-Ha-Joon Chang (2002) portrays the new substitution policies adopted by largecollective disregard of the domestic market developing countries such as Brazil, India, and strategies as “kicking away the ladder,” given China between the 1950s and 1970s largely that tariff and state subsidies for domestic failed. Import substitution typically depends on industries have played crucial roles in the prolonged protection of domestic industries, earlier development of western industrial with high tariffs for imported goods.powers. This suggests that the relationship Protectionism leads to persistently weak between the dynamic of a domestic market and performance by the firms in the international the development of domestic companies market. Scholars argue that import substitution deserves more scrutiny. Export may only be also fails to reduce import dependency, achieve one piece of a more complex puzzle of national sufficient economic diversification, andtechnological capacity building. alleviate social inequality in developing countries (P. Evans 1979; Haggard 1990; E. M. China faces additional geopolitical limits to Porter 1990; Wade 1990). Based on these relying exclusively on export-based findings, the World Bank promotes export development. There are long-standing industries as a standard policy for economic regulations banning U.S. firms from exporting development (World Bank 1993). certain potentially dual-use high technology to China. Due to its size, China is also susceptible Yet, critics of export-oriented policies point out to criticism of its successful export drive to the that export industry in many countries often United States as a result of the large balance of amounts to labor-intensive assembly with little trade gap. China therefore faces heavy technological value (Dickens 1998). Not only do pressures to open its own market to other MNCs have little incentive to transfer core countries, which Japan and South Korea were technology to developing nations, but even if able to avoid from the 1960s to the 1980s. they do the transfer often includes “know-how” (production engineering) but not “know-why” Yet, large countries such as China have large (basic design, research and development) (Lall and growing markets in their own right. OECD 1984, p. 10; Dickens 1998; Porter, W. Philip ranked China as the world’s sixth largest ICT and Sheppard, Eric S. 1998). These transfers market in 2005 (OECD 2006) and among the therefore often reinforce the dependency of the fastest growing. The Chinese home market thus receiving countries. Research on China’s trade allows domestic companies the opportunity to and export sectors finds a profound dualism, move directly into own-brand manufacturing

6 6 | 2 | 0 APJ | JF rather than moving progressively fromdriven by different global and domestic manufacturing others’ brands to creating their imperatives. When these two processes occur own. Indeed, quite a few Chinese companies in the same or closely related sectors at the developed their own brands only a few years same time, one finds the most favorable after start-up, often without moving through conditions for technological learning and the OEM phase. Yet, with many foreign business competitiveness of China’s companies. companies competing to market their products in China, indigenous companies need to find ways to become competitive. This is no small challenge for under-capitalized and inexperienced indigenous companies facing MNC giants. Whether they can meet this challenge depends on their technical and managerial capacities. But an additional crucial factor is the presence of world-class export- processing facilities in China. With easy access to competitive, reliable, and high-quality component suppliers — the same suppliers for MNCs in the global industry — Chinese companies can target the Chinese market with special designs and pricing, given their intimate understanding of the market, as well Synchronization of export upgrade and domestic as build their own distribution networks. If the market growth in China market for their products also grows at this time, they have a good chance to best the Synchronization allows the entry and rapid rise foreign competition. Export challengesof new manufacturers of mature technological essentially reduced the learning curve for products, as newcomers can tap into the latecomers by helping them improve their existing global supply chain. The economies of technical competence and competitiveness, scale enjoyed by the global parts suppliers without requiring them to accumulate detailed together with the mass demand in China’s engineering and processing skills in more market enable the competitiveness in final complex components. As their design and products by Chinese companies. What’s more, marketing abilities improve, indigenousintimate knowledge of the consumption companies are able to progressively replace preferences of a large domestic market may foreign products in the Chinese market, from spur technical innovation and thus the the low to higher end. This process has created development of products different from those in some of the fastest learners in the industry. advanced markets. A high-quality export facility Lenovo is among them. may help turn these innovative ideas into a viable commodity chain in a short time. Those Consequently, technological change in China Chinese companies that are able to locate the may differ from that of other developing intersections of these two processes are in a countries. The path of building Chinesestronger competitive position. companies’ competitiveness is best described as a synergetic model between importThe synergy of the external and internal market substitution and export upgrades. As shown in may even foster a movement toward a more figure 9, China’s export industry and domestic autonomous technological path than would market growth are two distinct processes otherwise be possible. Although China is not an

7 6 | 2 | 0 APJ | JF advanced technological power, the Chinese technological modernization able to change the state and Chinese firms have already started to fate of economies, military power and social develop technical standards that may have well-being in a few years” (p. 7). Evans (1995) global significance. Thus far, technicalcrafts a more refined model, situating the state standards have been the exclusive domain of in the institutional structure of societies. the most powerful western or JapaneseDepending on the degree of autonomy of states corporations and their counterparts infrom different social interest groups, Evans advanced countries. An export-orienteddivides states into two categories: predatory industry could only follow western technical states, exemplified by Zaire, which extract standards to sell abroad. A closed import- resources with little service to citizens in substitution regime can impose domestic return; and developmental states, like South standards, but it is almost certain to be left out Korea, which can formulate coherent and of the global mainstream. However, a combined effective developmental programs and guide import-substitution and export regime in a enterprises in technological development. large market may create a more interdependent relationship between MNCs While emphasizing the embeddedness of the and local firms, making it possible to establish state in society, Evans clearly privileges the alternative standards. In short, the trajectory of state in state-society relations. In contrast, China’s technological development needs to be institutional economists have long argued that understood not by treating export-oriented and institutions make the difference in economic domestic market-oriented activities asperformance. According to North (1990 p. 3): alternatives, but considering them as joint “Institutions are the rules of the game in a strategies for industrial development. society or, more formally, are the humanly devised constraints that shape human Institutional Evolution and the Role of the interaction. In consequence, they structure Chinese State incentives in human exchange, whether political, social, or economic. Institutional Studies of East Asia, and China in particular, change shapes the way society evolves through tend to view the state as the paramount player time and hence is the key to understanding in determining policy and political-economic historical change.” North argues that outcomes. However, the relationship between institutional changes are overwhelmingly technological development in ZGC and the gradual and evolutionary. Through a search Chinese state suggests a more complicated and selection process, the established picture. ZGC is better characterized as a “routines” which govern behavior at a product of institutional evolution underparticular time gradually give way to changes globalization, in part tolerated and assisted but started at the margins (Malecki 1991; Nelson, largely unanticipated by the state. Richard R. and Winter, Sidney G. 1982).

The role of the state and public policies in Institutional evolutionary theory sheds more technological development, especially in East light on ZGC than a state-centered approach Asia, has been a subject of heated debate. does. Looking closely, the most prominent Castells (1996) argues that the state plays a feature of the role of the state in China’s pivotal role: “If society does not determine technological development is not its leadership technology, it can, mainly through the state, but its high variability. In the People's suffocate its development. Or alternatively, Republic, technological policies swung from again mainly by state intervention, it can defense-led projects to civilian sectors, from embark on an accelerated process ofself-sufficiency to foreign dependency and then

8 6 | 2 | 0 APJ | JF to autonomous innovation, from central“muddling through” (2003, p. 186) seem still to planning to market driven, then to stressing be the best ways to describe this untidy state regulation and control. It is clear that it process. continues to search for a workable model for technological development. Conclusion

The dramatic shifts in state policies over the What can we learn from ZGC’s experience last few decades, however, reveal a unique about technological progress, not only in China feature of the Chinese state compared to the but also in other developing countries? For one states studied by Evans (1995): China’s central thing, we need to realize that indigenous government is anything but stable in its policy companies are indispensable agents for framework. Ever since the reform and open- cultivating and developing technology markets. door policies beginning in the 1970s, new Developing countries, in their pursuit of high actors partially or largely beyond state control technology, have a track record of attracting have been emerging, and the rules of the game MNCs while paying little attention to their are forever being contested and redefined. domestic companies. The story of ZGC shows Actors are forced to adapt to an environment of that while MNCs can introduce advanced heightened uncertainty. The development of technology, they typically have standardized ZGC illustrates this institutional instability. practices that are insensitive to local markets Rather than following a state issued blueprint or inappropriate for them, especially when of transformation, the region’s growth has been purchasing power is low. Left to their own cyclical, evolutionary, and often chaotic and devices, MNCs also lack the incentives, haphazard. The actors including state, MNCs, flexibility, and local knowledge to react to local firms and local research institutions are market changes. In contrast, indigenous firms locked in a quadrangular innovation system in understand their home court and have greater which each sees its influence wax and wane, commitment and flexibility to bring appropriate and each is challenged by others and by the and affordable technology to domestic changing political and institutionalconsumers. However, MNCs, despite their environment (figure 8). New institutions have drawbacks, are necessary partners for emerged, only to become inadequate a few collaboration and potential role models to learn years later. In short, like a reptile shedding its and perhaps importantly, deviate from. own skin, ZGC grows by generating and testing new identities, organizations, and strategies Second, ZGC’s experience shows us that the and by accumulating knowledge onroles of the state are necessarily multi-faceted. technological management and innovation. The state’s crucial jobs are not just providing specific policies or R & D capital but Far from being results of Chinese state policies, collaborating effectively with other the institutional changes in ZGC are complex technological agents and learning to reform products of confrontations, bargaining, and regional institutions under changed conciliation among the actors in the regional circumstances. In other words, the state must quadrangular innovation system. The state’s be willing and able to adapt and respond to actions and the effectiveness of its strategies changes and demands by other agents. are contingent upon their context. The same Institutional transformation has to be a learned strategies that worked in one place at one time process, as entrepreneurs, businesspeople, may not work in another place and time. Deng’s professionals, bureaucrats, scientists, and famous metaphor, “Cross the river by feeling consumers learn to cooperate while the new the stones,” or Naughton and Segal’srules of the game are being negotiated,

9 6 | 2 | 0 APJ | JF established, and observed. In the long run, the Internationalization of Economic Activity. New technological trajectory of ZGC is neither York: Guilford Press. magical, random, nor deliberately scripted. Rather, it is a dynamic adjustment process Evans, B. P. 1995. Embedded Autonomy: State involving multiple actors negotiating through and Industrial Transformation. NJ: Princeton drastic and systematic shocks that often come University Press. at short intervals. Evans, Peter. 1979. Dependent Development: Yu Zhou is associate professor of Earth Science the Alliance of Multinational, State, and Local and Geography, Vassar College. She has Capital in Brazil. Princeton, NJ: Princeton published extensively on the Asian immigrants University Press. and their transnational business networks in New York and Los Angeles. Francis, Corinna-Barbara. 1997. Commercialization without privatization: This article is a slightly revised version of a government spinoffs in China's high-tech chapter in The Inside Story of China’s High- sector. In Commercializing High Technology: Tech Industry: Making Silicon Valley in Beijing. East and West, edited by Judith B. Sedaitis. New York: Rowman & Littlefield Publishers, Posted at Japan Focus on February 9, 2008. Inc.

Sources Haggard, Stephan. 1990. Pathways from the Periphery: the Politics of Growth in the Newly Amsden, Alice. 1989. Asia's Next Giant: South Industrializing Countries. Ithaca, NY: Cornell Korea and Late Industrialization. New York: University Press. Oxford University Press. Hobday, M. 2001. The electronics industries of Cao, Cong. 2004. Zhongguancun and China's the Asia-Pacific: Exploiting international high-tech parks in transition: "growing pains" production networks for economic or "premature senility"? Asian Survey 44, no. 5: development. Asian-Pacific Economic 647-668. Literature 15, no. 1:13-29.

Castells, Manuel. 1996. The rise of network Hobday, Michael. 1995. Innovation in East society. Malden, MA: Blackwell Publishers. Asia: the Challenge to Japan. Brookfield, VM: Edward Elgar. Chang, H. Kicking away the ladder: Development Strategy in HistoricalHuchet, Jean-Franscois. 1997. The China circle Perspective. London: Anthem Press, 2002. and technological development in the Chinese electronics industry. China circle: economics Cumings, Bruce. 1987. The origins andand electronics in the PRC, Taiwan and Hong development of Northeast Asian political Kong. Washington, DC: Brookings Institution economies: industrial sectors, product cycles, Press. 254-289. and political consequences. InThe Political Economy of the New Asian Industrialism, Kim, Linsu. 1980. States of development of edited by Frederic C. Deyo. Ithaca: Cornell industrial technology in a developing country: a University Press. model. Research Policy 9, no. 3:254-277.

Dickens, Peter. 1998.Global shift: the Lall, S. 1984. Transnationals and the third

10 6 | 2 | 0 APJ | JF world: changing perceptions.National World Bank Group.ICT and millennium Westminster Bank Quarterly Review no. May: development goals: a World Bank group 2-16. perspective. 2003]. World Bank. 1993. The East Asian Miracle: Lemoine, Francoise and Deniz Unal-Kesenci. Economic Growth and Public Policy. New York: 2004. Assembly trade and technology transfer: Oxford University Press. the case of China. World Development 32, no. 5: 829-850. Endnotes:

Malecki, Edward. 1991.Technology and [1] In 2005, Zhongguancun adopted a new Economic Development: the Dynamics of Local, English name: Z-park. The simple name is Regional and National Change. Essex, UK: designed to help ZGC’s international Longman scientific and technical. recognition. This article will use its original Chinese name-Zhongguancun (ZGC), which has Naughton, Barry, and Segal, Adam. 2003. been associated with the region’s identity the China in search of a workable model:longest in China. technology development in the new Millennium. In Crisis and Innovation: in Asian [2] The information communication technology Technology. Cambridge, UK: Cambridgesector is defined by the World Bank as University Press. consisting of hardware, software, networks, and media for the collection, storage, Nelson, Richard R. 1996.The Sources of processing, transmission, and presentation of Economic Growth. Cambridge, MA: Harvard information (voice, data, text, images) (World University Press. Bank Group 2003, p. 1). Under the Chinese classification system, ICT includes Nelson, Richard R. and Winter, Sidney G. 1982. telecommunication equipment, computer and The Evolutionary Theory of Economic Change. other electronic equipment manufacturing, Cambridge, MA: Belknap Press. electronic information equipment sales and leasing, electronic information communication OECD. OECD Information Technology Outlook: services and computer services and software Information and Communication Technologies, (National Bureau of Statistics, GB/T 2006. 4754-2002). Many services focusing on the ICT Porter, W. Philip and Sheppard, Eric S. 1998. industry, such as venture capital, consulting The World of Difference: Society, Nature, firms, legal offices, and so on, may not be part Development. New York: The Guilford Press. of the official Chinese statistics on the ICT industry. Accordingly, I include data from other Rostow, Walt. 1971. The Stages of Economic sources. Growth, a Non-Communist Manifesto. 2nd ed. Cambridge: Cambridge University Press. [3] The Zhongguancun Administrative Committee provides certification for firms that Wade, Robert. 1990. Governing the Market: are deemed high-tech enterprises based on R & Economic Theory and the role of Government D inputs, shares of exports, and so on. Those in East Asian industrialization. Princeton, NJ: that are certified are exempt from paying Princeton University Press. corporate income taxes for three years and pay Webber, Michael J. and David Rigby. 1996. The a reduced tax rate for another three years. The Golden Age Illusion: Rethinking Postwar review process is supposed to take place Capitalism. New York: Guilford annually, and hundreds of firms may lose their

11 6 | 2 | 0 APJ | JF status as certified high-tech firms every year. revenue from selling manufactured goods. See “Zhongguancun Regulation.” [5] OEM is the dominant system of export in [4] Income from technology sales includes Taiwan and Southeast Asian countries, where licensing fees, technological transfer charges, the manufacturers in developing countries patent fees and income from technicalproduce products for multinational name-brand contracts and services. It does not include companies to sell abroad.